Are debt charities really impartial?

I have always been an ardent supporter of debt advice charities. But in light of two cases that I recently came across, I am beginning to have second thoughts.

In both cases, the debtors sought help from debt charities as they were eligible to propose a debt relief order.

The criteria for this includes having unsecured debts of under £15,000, assets below £300 and no more than £50 per month left after paying for normal living expenses.

The first case was that of Fred McCarthy, a respected 73-year-old ex-serviceman who was struggling to pay £8,500 of credit card debts.

Fred was told by his local Citizens Advice Bureau that he could propose a debt relief order. On its recommendation, he contacted various debt charities, which all told he wasn’t actually eligible because he had too much money left over each month.

Instead, he was told he needed to take out a debt management plan.

Thankfully, Fred finally managed to get a debt relief order, but it was not without a struggle.

The second case concerned Leon Fallas, who is 38, registered blind and has credit card debts of around £3,000. He experienced similar problems to Fred and I am now working with him to ensure he gets the debt relief order he so desperately needs.

Both these cases highlight the sometimes inconsistent and confusing guidance provided by different debt advisers, whether a charitable organisation or not.

Both men claim they were steered away from the debt relief order towards a debt management plan.

So what’s wrong? The fact that less than 12,000 debt relief orders have been proposed since their inception in April 2009 suggests a reluctance across the industry to process these.

I suspect the low £90 fee that is charged to the borrower to administer a debt relief order could be to blame. A debt firm earns the first £10 as their fee, with the remainder going to the Insolvency Service.

In contrast, debt management plans can earn a firm hundreds of pounds. So where is the incentive for a debt advice firm, charitable status or not, to propose a debt relief order instead of a debt management plan?

Most people believe that the debt charities are impartial, but are they really?

Your answer must surely depend on your interpretation of ‘impartial’. In my book it means: neutral; unbiased; independent; balanced; and (importantly) detached. 

The question is: can a firm funded by creditors and sponsored by creditors be impartial?

I believe that not-for-profit debt agencies serve an important purpose but I wonder how many other desperate and vulnerable people have experienced the same treatment and will continue to do so until this area is more closely controlled.

Your Comments

I went to CCCS for a debt plan as my lender said they would help me, now i know why the bank sent me there, they are still adding interest and my debt is increasing each month.

Everyone said CCCS were the best firm to go to for debt advice but after looking into them further and reading forums I cannot understand why they are being advertised as the 'not for profit firm' quote (Martin lewis) to use?

This story really highlights the state of the debt market in this country, you don't know who to trust, and I mean trust. I feel really sorry for those two men.

I am a Housing Support worker and i don't recommend DRO to my customers at the moment. I think its a) bad practice to let people off their debt! and b) often doesn't resolve the main brunt of debt (the benefit overpayments etc.) which still exist afterwards. Also, people i work with tend to rent properties, and this goes on their record and they struggle to find new tenancies.

People who learn to manage a repayment plan (preferably set up privately at the £1 per month rate) tend to appreciate their money more.

Dealing with any kind of debt is a nightmare, and whether the support is impartial or not, getting lots of it, from lots of agencies, is the answer in my book. More people on your side, more encouragement, more reminders, and more people willing to badger/nag/bother your creditors as and when needed. The best advice is often your own opinion based on the research and experience of others!

Christians Against Poverty (CAP) is a free service for those in debt. You don't have to be a Christian to use their services(The service is the same whether you are a Christian or any other religion or if you have no religion at all!). They have a freephone number (0800 328 0006) to ring.They give free impartial advice and will see you through until you are debt free.